Self-employment driven by higher earners, says report

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A plumber for Pimlico Plumbers recently won a tribunal case arguing he was entitled to basic workers’ rights

The rapid growth of self-employment in the UK has been driven more by people in higher-paid than low-paid work, according to a new report.

The analysis comes from the Resolution Foundation, an economic think tank.

It says the “privileged” self-employed, with good educational qualifications and higher earnings, made up 57% of the growth in self-employment after 2009.

Among them were people working in law, accountancy, health services and management consultancy.

The think tank says they typically earned much more than the average worker, at between £45,000 and £65,000 a year.

“Rising self-employment has been the biggest jobs story of the last decade,” said Adam Corlett, of the Resolution Foundation

“This growth has been controversial at times, with several companies finding themselves in court as workers try to address the insecurity that often comes with self-employment.

“But behind the headlines the real recent growth area for the self-employed has been in lucrative sectors such as advertising and banking,” he added.

Precarious or privileged?

There are now nearly five million people in the UK classified as self-employed (including those self-employed in a second job) and the rise in their numbers in recent years has contributed almost half of the country’s growth in employment.

In fact, there are many more self-employed people than either agency workers (approximately 850,000) or workers on zero-hours contracts (roughly 900,000).

Much public discussion has focused on the self-employed who earn very little in the so-called “gig economy”, such as Uber drivers and delivery drivers.

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Workers in the “gig economy” may be delivering meals or parcels, or driving Uber cabs

The Resolution Foundation says their work is indeed precarious.

But whether precarious or privileged, self-employment has been spreading in many other sectors, including those where being self-employed has been a way of life for decades.

Meanwhile, the fastest growth of self-employment since 2009 has been in advertising, public administration and banking, but self-employment among taxi drivers has risen by only 7% in that time.

Public finances impact

The Resolution Foundation says the division between the privileged and precarious self-employed means that this category of worker is in effect split into two tribes.

As well as earning less and having poorer educational qualifications, the precarious group are more likely to be young, immigrants, underemployed, living outside south-eastern England and in receipt of tax credits.

The report also argues that the growth of self-employment is very significant for the public finances because those with high earnings can cut their tax and national insurance payments by operating as companies.

That will become even more attractive if, as promised by the government, the rate of corporation tax is cut to just 17%.

“The Office of Budget Responsibility estimates a £3.5bn exchequer cost in 2021-22 from incorporations rising faster than employment,” said the report.

It also points to other well-known problems with self-employment, such as the lack of legal protection currently given to employed workers, and the fact that the self-employed are less likely to save for a pension.